Typically, when you conduct a trade or business, you’re considered to be self-employed. There are two types of self-employment:
If either one applies to you, the IRS has some essential guidelines you should know about on how your self-employment income can affect your federal tax return.
Self-Employed Income – Even if you only do your self-employed work part time, you still need to report the income in addition to the money you receive from your full-time or regular employment.
Schedule C or C-EZ
– With self-employment, you are required to file either a Schedule C
, Profit or Loss from Business, or a Schedule C-EZ
, Net Profit from Business, along with your Form 1040. If you had expenses totaling less than $5,000 and meet other qualifications, you may be eligible to file a Schedule C-EZ – check the form instructions for more details.
Self-Employment Tax – Social Security and Medicare taxes are included in self-employment tax, and you may have to pay these taxes if you made a profit. The IRS has the Schedule SE, Self-Employment Tax, in which you can use to calculate the tax. If there’s an amount you owe, file the Schedule SE along with your federal tax return.
– Along with self-employment, you may have to pay estimated taxes; these are typically payments on non-withholding income. The IRS states that estimated taxes can be paid in four annual installments. And you may already owe a penalty if you haven’t paid enough tax throughout the year.
There are a number of ways you can pay estimated taxes – check out our helpful blog for more information.
3 Ways To Pay Your Estimated Tax
Acceptable Deductions – You can deduct both ordinary and necessary expenses that were paid to operate your business. The IRS lists necessary expenses as those that are “helpful and proper for your trade or business,” while ordinary expenses are “common and acceptable in your industry.”
Proper Time for Deductions – Normally, expenses can be deducted in the same year they were paid or incurred. But some costs may have to be “capitalized,” which means you can deduct the costs within a number of years. The IRS has its Small Business and Self-Employed Tax Center webpage available for more information about tax compliance.
And if you need more time to get all your small business or self-employment tax information together, you can file a business or personal tax extension in minutes with ExpressExtension. We also offer FREE downloadable apps for iOS/Android devices in which you can e-file your Form 7004 or Form 4868 at anytime and anywhere you may be.
For any assistance or questions about e-filing our tax extensions, give our US-based, live e-filing professionals a call at (803) 514-5155, Monday through Friday from 9 a.m. to 6 p.m. EST – or email us at email@example.com.